Germany Sells Bills With Negative Yield for First Time Amid Crisis Concern

Discussion in 'Wall St. News' started by THE-BEAKER, Jan 10, 2012.

  1. Germany sold six-month treasury bills at a negative yield for the first time amid demand for the debt securities of Europe’s biggest economy as a haven from the sovereign debt crisis roiling the region.

    The government auctioned 3.9 billion euros ($4.98 billion) of securities maturing in July at an average yield of minus 0.0122 percent, the Federal Finance Agency said in an e-mailed statement today. It was the first time it sold the securities at a negative yield, Joerg Mueller, a spokesman in Frankfurt, said in a telephone interview. The Netherlands sold 107-day bills at minus 0.007 percent on Dec. 12.

    Some investors are prepared to pay when lending to the most creditworthy governments in exchange for the assurance of getting their capital returned as a solution to the euro-region debt crisis, which forced Greece, Ireland and Portugal to seek bailouts, eludes policy makers. Yields on three-month U.S. Treasury bills fell below zero for the first time in December 2008 after the collapse of Lehman Brothers Holdings Inc.

    “It just underpins how nervous the overall market is,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “There are investors out there who really worry about the return of their money. That’s why they are OK donating some of their money to Germany, just to make sure they get it back.”
  2. Wow... WTF...? Is this just due to trading activity...? I don't get why they'd hold on to something for a guaranteed loss. Can you trade in and out of these...?
  3. Yes, you can, obviously...

    You hold on to it, because you think you might be holding a NeueDeutschmark-denominated asset (and paying for it in EUR).
  4. So you'd hold on to bills hoping that the country that just changed their currency would honor them in the new currency?... What if the new exchange rate they set isn't in your favor or if they price the debt with a haircut for you...? Not a good trade in my opinion...

    I'm guessing there is a lot of EUR liquidity with nowhere to go... Probably too many buyers rushing to Germany... I don't think it will last. Then... from Germany they'll pick up debt from other countries as well.
  6. Well, I don't know if it's a good trade or a bad trade. If you have other ideas on how an investor can potentially end up with a NeueDEM-denominated asset in the case of EUR breakup, pls don't keep it all to yourself and share. I don't really understand, in general, why people are so up in arms about these bills trading negative. I mean why isn't anyone excited about Swiss forward LIBOR rates being negative (EuroSwiss trading above par)?
    I am not sure what you might be referring to here...
  7. GTS


  8. Banjo


  9. The explanations offered in this article are, by and large, incorrect, in my view.
  10. No idea... NeueDEM don't actually exist yet as far as I know. I wouldn't do it because I wouldn't know the terms... I also wouldn't know what the exchange rate would be... What if it's like 3 EUR to 1 ND... There goes 66 % of your capital.

    Yeah... I'm thinking its some sort of liquidity play too...
    #10     Jan 11, 2012